Three warns prices will rise in UK if spectrum isn’t capped

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Operator says Ofcom must make the right decision in the interests of consumers and competition

Three has warned of price rises for UK consumers if Ofcom doesn’t place spectrum caps on its operator rivals before the next auction.

The regulator is opening a consultation period for the 2.3GHz-3.4GHz auction that is due to take place next year. Last month, Three CEO Dave Dyson said its current rules on spectrum bidding is wrecking competition in the UK.

He called on Ofcom to put a cap in place so that no network can own more than 30 per cent of the airwaves following the next auction, in order to maintain healthy competition.

Three claims BT/EE currently accounts for 42 per cent of available spectrum and Vodafone 29 per cent, leaving O2 and Three with just 14 per cent and 15 per cent respectively.

Price hike

Speaking exclusively to Mobile News, Three general counsel and head of regulatory affairs Stephen Lerner (pictured) claimed prices will increase at an even quicker rate if this spectrum balance isn’t addressed.

In the ‘Ofcom Strategic Review of Digital Telecoms, Discussion’ document from February, the regulator said competition had cut the price of a typical bundle of mobile services by two-thirds in real terms, from around £40 in 2003 to £13 in 2012.

It said this was driven by access to spectrum, with the 3G auction in 2003 designed to encourage a new operator into the market (Three), and the 4G auction to maintain four national wholesalers. 

In its ‘Consumer Experience Report’, Ofcom revealed that average prices rose 2.3 per cent in 2015 – the first such recorded increase, which it attributed to a spectrum imbalance.

Limited capacity

“When we weren’t capacity-constrained, we went at the market very aggressively,” said Lerner. “We offered unlimited tariffs, really good pricing, free 4G and great roaming deals.

“We tried to gain customers and scale but now that we are very tightly managing that because of being capacity-constrained, we’re no longer providing that downward pressure on the UK market.

“That means other operators can raise prices and are not worried about losing customers because they know we can’t absorb them due to our limited capacity.

“The history of Three UK is being a challenger and being a real competitive pressure on prices, adding value and innovation into the UK market

“If we aren’t able to do that, prices will increase and will continue to do so. That trend would not only continue, it would accelerate.”

Do the right thing

“I would urge Ofcom to do the right thing and make the right decision for the interest of consumers and competition, while not allowing a bad situation to get worse.

“This is the last opportunity for many years and the last big chunk of spectrum that is being auctioned. They got it wrong with the 4G auction but can’t afford to get it wrong again,” he added.

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